(“Understanding the regulatory scenario in this sector is extremely crucial not only due to the rapid and ongoing changes at the global level, largely with reference to GMP, GCP (Good Clinical Practices) and GCP (Good Laboratory Practices) but also due to the onus on the regulatory bodies to ensure a healthy supply of quality drugs at affordable prices to the Indian masses.”)

The above words are that of Dr. Parvathy K Iyer, Assistant Professor, Centre for Studies and Research in Science, Technology and Innovation Policy, Central University of Gujarat.

India’s regulatory system is somewhat complex as it involves multiple ministries and departments under them. It has the Ministry of Health and Family Welfare which looks after issues concerning public health, Ministry of Chemicals & Fertilizers focusing on policy matters, Ministry of Commerce and Industry, Ministry of Science and Technology.

However, the key authorities in focus are DCGI (Drug Controller General of India) a department of CDSCO (Central Drug Standard and Control Organization) which functions under Ministry of Health & Family Welfare, NPPA (National Pharmaceutical Pricing Authority), DOP (Department of Pharmaceuticals).

For the last five years, the pharma and also medical devices industry in India is facing challenges from the main regulatory agencies, viz., CDSCO and NPPA. The recent happenings are from CDSCO/DCGI on clinical trials followed by FDC (Fixed Dose Combination) drugs and price cap on drugs and medical devices from NPPA.

Below is an exclusive report on Regulatory Hurdles given by LSW LifeScienceWorld’s Advisory Board Member Dr.Milind Antani, and Managing Partner-Pharma & Life Sciences, Nishith Desai Associates and his colleagues Darren Punnen and Anay Shukla.

‘Taking Regulatory Hurdles in Stride: The Resilient Indian Pharmaceutical and Medical Device Industries’

Year on year, the growth of the pharmaceutical and medical device industries have only been heading skyward. Between 2015 and 2016, the pharmaceutical industry grew by 29%, and is projected to touch $55 billion by 2020 at a Compound Annual Growth Rate (“CAGR”) of 15.92%. The medical device industry is estimated to reach between $25 and 30 billion at a similar CAGR of 15%, with India currently being the fourth largest market in Asia for medical devices. The pharmaceutical industry, on the other hand, is the largest generic drug producer in the world, accounting for 20% of global generics. Both industries have immense potential for growth from both domestic and foreign players. But is the regulatory environment in India helping the industries in fully realizing this potential? The pharmaceutical and medical device industries have faced multiple challenges, and although the government has been a catalyst for growth and actively working towards streamlining policies and procedures, the ever-developing industries still face certain issues. Some of the issues that were faced by the pharmaceutical and medical device industries over the past few years as well as the current challenges for the industries are discussed below.

For the pharmaceutical industry, clinical trials are crucial for the development of new products. India had seen a low point a few years prior to 2013, where several gaps in the regulatory framework allowed trials to be conducted against the spirit of good clinical practices and ethical standards. This forced the Supreme Court to step in, suspending all clinical trials in the country until all gaps in the framework had been satisfactorily covered. Many sponsors decided to move the trials away because Indian trials were part of global trials and they could not afford to lose time. Others decided to suspend clinical trials because of draconian nature of the law. With time, however, these gaps were filled in by the regulators, and ongoing efforts are going a long way in revamping the clinical trial space. Over the last two years, significant rationalization of clinical trial regulatory framework has taken place. As with many other areas, the Indian government is currently reworking its regulations in order to bring about ease in conducting clinical trials. With a view to promote clinical research, the Central Drugs Standard Control Organization (CDSCO), the apex regulator body for pharmaceuticals and medical devices in India, is actively revising the current procedural framework in order to bring about convenience and reduced paperwork. In fact, the regulatory environment is more conducive to conduct clinical trials than ever before. Recently, the CDSCO had even decided to allow certain decisions regarding clinical trials to be made by the ethics committee constituted for the trial, after the committee’s own evaluation. The cap on the number of trials that an investigator can participate in has also been relaxed, along with the approval procedures for the addition of clinical trial sites.

With further relaxations in the Foreign Direct Investment (“FDI”) Policy, the government is working towards attracting further investments in this space. The requirement to approach the Foreign Investment Promotion Board (“FIPB”) is only triggered for brown field pharmaceutical investments that are above 74%, thereby further easing regulatory requirements. The 2017-18 budgets also proposed the dissolution of the FIPB to provide for a more conducive, single-window clearance procedure. For manufacturing of medical devices, 100% FDI is permitted without any restrictions. These relaxations, as well as potential further relaxations of the FDI Policy, will go a long way in attracting foreign investments in the pharmaceutical as well as medical device space.

Another move that has been lauded by the pharmaceutical industry is the relaxation in the approval requirements for the import or export of human biological products for commercial purposes. Earlier, the industry would have to approach the authorities on multiple occasions in order to import or export human biological for commercial purposes. With these relaxations, the industry is only required to make a declaration stating compliance with the law, making for a more seamless regulatory process.

The clarity which the government brought in to the drug price control framework has saved the pharmaceutical industry a lot of compliance challenges. Earlier, when the National Pharmaceutical Pricing Authority (“NPPA”) revised the price of scheduled formulations in the market, the industry was required to recall and relabel/re-sticker the existing stock within forty five days of the revision. This caused a lot of logistical and administrative difficulties for the producers of the essential medicines. However, a clarification was issued by the NPPA, allowing for producers to submit the revised price to dealers and retailers instead of recalling and relabeling/re-stickering the existing stock. The intimation of the revised price was even permitted to be sent to the retailers and distributors through modes such as email or whatsapp. This had greatly helped the industry in ensuring compliance with the revision of drug prices.

The medical device industry has also reaped the benefits of an improving regulatory framework. One of the most significant and much awaited change in the regulatory framework has finally come to fruition – a separate set of rules to govern the medical device industry. With the new Medical Device Rules, 2017 coming into effect from January 1 2018, companies are gearing towards a host of changes and improvements in the space. The regulators have been actively revising the framework in order to bring in more ease for the industry. For example, the CDSCO had decided to extend the validity of Free Sale Certificates (“FSC”) up till the expiry of the manufacturing license. This decision is also reflected in the new medical device rules. This move really helped the industry as the requirement to apply for and obtain a fresh FSC even though the applicant had a subsisting manufacturing license had caused snags in the ease of doing business.

While the government has done a great job in alleviating the concerns of both industries, there are still various issues that remain, which are causing difficulties for both industries in terms of conducting business in India. A glaring example of a thorn in the industries’ side is the change in constitution provisions under the current regulatory framework. As the law reads today, a license holder under the Drugs and Cosmetics Act, 1940 and Rules, 1945 (“D&C Act and Rules”) who undergoes a ‘change in constitution’ is required to immediately intimate the licensing authority, and the existing license is valid for a period of three months from the date of change in constitution, unless a fresh license is issued before the expiry of three months. In an industry that sees numerous mergers and acquisitions, there are numerous issues with this provision of law. First, it is unclear as to what amounts to a change in constitution. Although the CDSCO has issued clarifications in this regard, the lack of consensus amongst the state and central level regulators continue to be a problem. Further, an application sometimes takes more than three months for processing. In such situations, companies are forced to halt operations until the new license is issued, which causes multiple and far-reaching commercial issues. This problem seems to have been addressed under the new medical device rules, with existing licenses being valid until the application for a fresh license is either granted or rejected. However, the problem remains for the pharmaceutical industry, as well as the medical device industry until the new rules formally kick in. An amendment to the D&C Act and Rules is therefore critical.

Drug pricing continues to pose some challenges for the pharmaceutical industry. Now, with the fixation of price for coronary stents, these challenges may potentially be faced by the medical device industry as well. While calculating the ceiling price for a scheduled formulation, the law – the Drugs Price (Control) Order, 2013 (“DPCO 2013”) – has fixed a standard retailer margin of 16%. However, the industry practice that is seen today is to pass on to retailers a margin of 20-25%. Most players in the industry have come to accept this difference of policy and practice as a ‘loss’. However, this ‘loss’ really starts to pinch when the margins are squeezed further because of downward revision in the Wholesale Price Index (“WPI”), which results in further reduction of the ceiling price, as was witnessed in 2016. There is a need to revisit the provisions of the DPCO 2013, in order to encourage more industry players to manufacture essential medicines in India.

In terms of marketing, the industries still do not have a mandatory code to follow. The Uniform Code of Pharmaceutical Marketing Practices (“UCPMP”) continues to be a voluntary code. While many reputed pharmaceutical and medical device companies strictly adhere to the UCPMP, it is not always the case with other companies. This makes it difficult for conformant companies to compete, due to the lack of a level playing field. A mandatory code has become the need of the hour, so that companies can train their sales representatives and also so that all companies compete in a fair and ethical manner.

Another issue that affects the medical device industry is in relation to advertisements. One of the main objectives of the Drugs and Magic Remedies (Objectionable Advertisements) Act, 1954 and Rules, 1955 (“DMRA”) – a legislation that restricts the advertisement of certain drugs –is to prevent consumers from self-medicating. Medical devices too now fall within the ambit of this legislation. The legislation, which is now archaic, contains a schedule that lists diseases for which advertisements are not permitted. While some of the diseases and disorders in the schedule continue to remain incurable, significant advancements in the field of medicine have made it possible to treat some of these conditions, which include disorders such as cataract. However, since the law has not been revised in some time, these continue to find mention in the schedule, which prevents the industry from being able to make the public aware of the treatment options available to them. There is, therefore, a need for the government to revise the list of diseases and disorders listed under the schedule of the DMRA in line with medical advancements, so that now treatable conditions are no longer covered under the legislation.

The Indian regulatory environment surrounding the pharmaceutical and medical devices needs to evolve to unlock the true potential of these industries. The benefits to bringing about ease in doing business would not be limited to the companies, but extend to patients as well, which is the ultimate goal of every government. While there have been a host of changes and forward-looking amendments to the current law, there still exists many issues that need to be ironed out. While the industries will continue to grow as they are today, we await the necessary sea-change in the law in order for them to really sail through.